$3.5 billion Germany deal the biggest yet for Israeli arms sector

Israeli arms exports reached a new record of $12.5 billion dollars last year, double the amount from three years earlier, says its defence ministry.

Israel’s fears of attacks from Iran and other foes have led it, together with its top ally the United States, to develop hi-tech systems designed to knock incoming rockets and missiles out of the sky.

Berlin’s purchase of Arrow 3 had to be approved by Washington because the system was jointly developed by Israel Aerospace Industries (IAI) and US aerospace giant Boeing.

The system aims to shield Germany and its neighbours from ballistic missiles that can carry nuclear warheads by intercepting them as far as 2,400 kilometres (almost 1,500 miles) away, outside the atmosphere.

Israel, a country of nine million people, has fought multiple wars with Arab states since its foundation in 1948 in what was then Palestine.

As Israel marks a half-century since the 1973 Arab-Israeli war, its arms industry is earning billions, much of it now driven by the sharply heightened tensions between Nato and Russia.

‘Europe always a priority’

“The war in Ukraine created a demand for military systems all over the world,” said Uzi Rubin, considered the father of Israel’s missile defence programme.

“This is a situation that benefits all Western defence industries - European and US as well as Israel’s,” added Rubin, an expert at the Jerusalem Institute for Strategy and Security.

While Israeli arms sales have been fuelled by the Ukraine war, Israel has refrained from selling weapons to that country in an apparent effort to avoid antagonising Russia.

In another major contract, newly minted Nato member Finland was quick to announce plans to buy an Israeli defence system against aircraft, rockets and missiles, for 316 million euros.

“The war in Ukraine is likely to further increase European demand for systems that Israel already has a strong position in,” said Elliot Chapman, Middle East and North Africa analyst for British open-source defence intelligence company Janes.

“Europe has long been a priority for Israeli exports,” he added.

“That said, European countries are keener than ever to keep capabilities and funding in their borders,” he said, citing EU concerns about an over-reliance on defence equipment made elsewhere.

French President Emmanuel Macron in particular has argued Europe must maintain its “strategic autonomy”.

Since its foundation, Israel has received lavish US military aid - more than $125 billion, according to a US State Department report from 2021.

This has helped it build “one of the world’s most capable, effective militaries and turned the Israeli military industry and technology sector into one of the largest exporters of military capabilities worldwide,” the report said.

‘Arms race with our enemies’

While conflicts have boosted Israeli arms sales, so has the US-brokered peace initiative dubbed the Abraham Accords, under which Israel normalised ties with the United Arab Emirates, Bahrain and Morocco in 2020.

Despite those diplomatic breakthroughs, and efforts toward a similar deal with Saudi Arabia, Israel remains in a permanent state of heightened military alert against other threats - chiefly Iran and its allies, which have vowed its annihilation.

“We have always been in an arms race with our enemies, this is something we know how to deal with,” said Yuval Steinitz, the chairman of Rafael, a behemoth of the Israeli defence industry.

The group spends up to five billion shekels (1.2 billion euros) on research and development per year, Steinitz said.

In recent years Israel has become a leader in unmanned aerial vehicles, which have been used on multiple battlefields, including Azerbaijan’s war in 2020 against Armenian forces which has now flared again.

Rubin said “Israel is usually exporting military systems developed for its own defence, based on lessons from its frequent wars and often battle-proven.